Pharmaceutical stocks bounce back

PHARMACEUTICALS

The pharmaceuticals sector enjoyed a golden decade in the 1990s when a slew of innovative drugs came to the market, leading to companies generating tens of billions of dollars in profits.

However, the following 10 years have been dominated by concerns over patent expirations and increased competition from generic pharmaceuticals companies. The situation has been exacerbated by diminishing returns on research and development (R&D) investment coupled with a tougher regulatory environment. During these challenging times, many of the major pharmaceuticals companies have increasingly turned to merger and acquisition as a coping mechanism, hoping economies of scale would lead to efficiencies in both sales and R&D productivity. This has led to companies developing leaner sale...